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Oil Price Rebounds to Above $43

December 08, 2008

NEW YORK --- Oil prices rebounded from four-year lows and rose above $43 a barrel Monday as OPEC floated the option of a "severe" production cut and several countries announced new plans to stimulate their economies.

The Associated Press reported that Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said Saturday that the cartel could announce a "severe" reduction of output quotas at its next meeting on Dec. 17 in Algeria.

"Obviously when OPEC talks like this they always give the market a boost, but the question is how sustainable it's going to be," Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, told AP. "OPEC can talk the talk but they have a hard time walking the walk."

Light, sweet crude for January delivery climbed $2.82 to $43.63 a barrel on the New York Mercantile Exchange. On Friday, the contract dropped nearly $3 to settle at $40.81 and prices fell as low as $40.50, levels last seen in December 2004, AP reported.

Khelil would not specify how deep the output cut would be, AP reported. However, he acknowledged that some analysts are predicting a decrease of as much as 2 million barrels per day.

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